3 big-picture shifts you should pay attention to

3 big-picture shifts you should pay attention to

Separating truly meaningful market signals from the mountains of daily noise has never been more challenging. Here’s some help: Pay attention to these three big picture changes happening today. Rick Rieder explains.

In today’s era of increasingly abundant information, separating truly meaningful market signals from the mountains of daily noise has never been more challenging, or more vital for investment success.

Larry Fink recently advised you to “tune out the noise” if you want to be a better investor. He suggested focusing on your long-term investing goals rather than on all the information swirling around in news media about the markets’ daily ups and downs.

Market Realist – Investors today are exposed to a torrent of unceasing financial information through newspapers, social media, and television shows. These media offer investment advice.

But you need to set your long-term financial goals and focus your investment strategies on achieving those goals rather than reacting to this barrage of news. Reacting emotionally to the news without a long-term focus could cost you. Jumping in and out of the market often leads to missing out on powerful rallies.

The following graph shows you the effects of exiting the market during strong rallies. If you look at returns from the S&P500 (IVV) from 1996 to 2005, missing the market’s top ten days reduced returns by more than half.

Volatility (VXX) comes in spikes. Investors reacting to news get spooked by falls and sell off their positions, foregoing returns they would have accrued in the bounce-back.

Market Realist – Academic studies have shown that professional investors have extreme difficulty outpacing market benchmarks like the S&P 500 (SPY), the Dow Jones (DIA), or the NASDAQ (QQQ). So you should focus on your long-term financial goals. Choose investment strategies accordingly and tune out the noise to become a better investor. Read Must-know: Be a better investor—tune out the noise to find out more.

In addition to focusing on what you’re trying to achieve, I believe three big picture changes happening today are also worth tuning into, as they have real implications for the economy, markets and portfolios over the long term. In other words, it’s worth stepping back and considering these three broad shifts that I believe will hold an outsized impact on effective investment decision making in the years ahead.

Market Realist – Read on to the next part of this series to find out how the world’s aging population will affect your investments.